Chime CEO Chris Britt on the reasons why Americans don’t trust banks

The disruption of traditional brick-and-mortar banks by fintech companies was already happening as the pandemic sent startups offering banking services faster, cheaper and more digitally accessible into overdrive.

A rush of venture capital followed, with fintech companies raising more than $130 billion in 2021 alone, creating more than 100 new unicorns, or companies with at least $1 billion in valuation.

But as the fintech field has become more crowded and the economy has entered a more recessionary environment, funding has dried up and more fintechs have taken value cuts. The fintech bill goes well beyond private companies, as public markets have not been kind to former Disrupters Dave and SoFi, both of which traded well off their IPO prices. Legacy banks have seen their efforts to disrupt these disruptors fall short – for example, Goldman Sachs recently pulled back on its fintech ambitions.

Making that banking picture even murkier is the recent collapse of Silicon Valley Bank and the wave of concerns that followed.

But Chris Britt, CEO of Chime, which ranked No. 15 on the 2023 CNBC Disruptor 50 list, says even with much of the banking system on edge, he still sees strong market demand for fintechs.

“It’s very difficult for [the big banks] structurally to compete for the segment we’re aiming to serve, which is kind of mainstream middle- and low-income consumers,” Britt said on CNBC’s “Squawk on the Street” Tuesday. “Big banks do a pretty good job of high-income, high-FICO -score people who have large deposits and are creditworthy, but for most Americans, the 65% who live paycheck to paycheck, the only way big banks can make the math work to serve them is by being very punitive on fees .”

Addressing the segment of the population that has become disillusioned with traditional banking was part of the impetus for Britt and Ryan King to found Chime in 2010. This year marks the fourth time Chime has appeared on the CNBC Disruptor 50 list.

“The level of trust that mainstream Americans have in banks is extremely low, and that was part of the opportunity we pursued,” Britt said.

Those confidence levels waned in recent weeks with the collapse of Signature Bank and Silicon Valley Bank, followed by the eventual government seizure and sale of First Republic Bank. Nearly half of adults surveyed in a recent Gallup poll said they were “very concerned” (19%) or “moderately concerned” (29%) about the safety of their money at a bank or other financial institution.

Britt said that while Chime has a relationship with SVB, it “hasn’t seen much of a change as a result of the SVB situation” from its members, since “99.9% of our consumer deposits are FDIC insured because they are well below the threshold of $250,000.”

Chime’s focus on having a primary account relationship with members unlike other fintechs that may focus on one-off or peer-to-peer transactions has helped the company’s business be “very resilient.”

“Most of our members use Chime for non-discretionary spending; they go out and shop at Target or Amazon or Subway, and they use it for everyday purchases,” Britt said. The majority of Chime’s revenue comes from network partners such as Visa when members use their cards at the point of sale.

Chime, which was valued at $1.5 billion in 2019, reached a valuation of $25 billion in 2021. The company became profitable on an EBITDA basis during the pandemic, Britt told CNBC in September 2020.

However, the company has not been immune to today’s challenges. In November, Chime laid off 12% of its workforce, or about 160 people, in a move Britt said would help the company thrive “regardless of market conditions.”

Still, Chime remains open to a future IPO, Britt told CNBC’s Julia Boorstin, something the company has long been rumored to do well ahead of the current frozen IPO market for new offerings from venture-backed startups.